Macro Morning

See the latest Australian dollar analysis here:

Macro Morning

A little bit more risk aversion crept in overnight as USD strength pulled back after surging strongly from last week’s inflation print. The UK inflation print also surprised to the upside, taking the air out of most European stocks with Wall Street eventaully finishing slightly down as well.  Treasury yields fell back slightly but the 10 year remains above the 1.6% level again while gold lifted more than 1% to almost get back to the $1870USD per ounce level. Other commodity markets were mixed with oil futures down nearly 3%, copper falling nearly 2% while iron ore retraced below the $90 level.

Bitcoin and other cryptos remained depressed after getting hit hard in the previous session with the former breaking down to the $58K level, matching the October lows. The four hourly chart shows a very minor potential swing trade could eventuate after being so oversold here, but resistance may prove too strong at the $60K level:

Looking at share markets in Asia from yesterday’s session, where mainland Chinese shares were quite mixed with the Shanghai Composite up 0.4% to close at 3537 points while the Hang Seng Index gave up some of its previous gains to be down 0.25% at 25650 points. Price action wants to follow through on the one-day breakout reversal, but hesitation over the medium term downtrend has not yet been pushed aside with minor short term support needing to build from here at the 25000 point level proper:

Japanese markets slowly lost direction, with the Nikkei 225 closing 0.4% lower at 29688 points. Futures are indicating a further pullback as Yen appreciated sharply overnight, combined with the minor risk off mood in general as daily momentum inverts from the slightly overbought levels. It remains all about resistance overhead at 30000 points, which continues to look too strong here to get things moving back to the September highs:

Australian stocks were unable to take the “good” wages data in its stride with more falls, the ASX200 closing 0.7% lower at 7369 points. SPI futures are flat, losing just a handful of points but this break below the 7400 point level is not good news for bulls in the short term as lower commodity prices continue to weigh. The daily chart is a jumble with a lot of internal buying support but no upside action above these levels as momentum rolls over:

European markets were again mixed with peripheral markets and the FTSE still falling in the wake of the high inflation print, with the German DAX treading water to finish slightly up at 16251 points. Momentum remains nicely overbought as the market continues to push well above the 16000 point level and the daily chart still looks extremely bullish now as a much lower Euro provides a steady tailwind:

Wall Street was looking to lift out of its poor start of week funk but was unable to translate the previous session into further gains with the NASDAQ down 0.3% while the S&P500 lost just over 0.2% as both markets failed to get back to their previous record highs, the latter retracing well below the 4700 point level. The four hourly chart clearly shows resistance above that should be easy to clear in this runaway bull market, but expect the unexpected and look for any weakness below the 4670 point level:

Currency market volatility is abating somewhat in the wake of the USD inflation print with the US dollar index (DXY) losing a little ground overnight but its all relative given the big moves previously. Euro was able to stop the major selloff, bouncing back a little above the 1.13 handle as short term momentum reverts back from well oversold levels but price action is neutral at best here. My contention of just another pause or a minor relief rally before another leg down still holds – watch the high moving average to act as short term resistance:

The USDJPY pair however had the biggest moves of the night with a big return to safety by Yen buyers, sending it back down to the 114 level and breaking short term support in the process. As I mentioned yesterday, short term momentum was nearly off the charts, so expect a minor retracement to develop here but this has been sharper than I though so we could see a follow through below the 114 level that should have been steady support:

The Australian dollar however remains on trend – down that is – still getting pushed down through the 73 level overnight after previously rejecting overhead resistance from its little start of week relief rally. The continued pressure on iron ore and other commodities prices continues to weigh heavily for the Pacific Peso, so this return to the previous weekly low at the 72.70 level is not unexpected, setting up conditions for a new breakdown below:

Oil crude futures pulled back sharply on the EIA report with Brent down nearly 3% to finish at the mid $80USD per barrel level. Price action has been deflating following the previous false breakout move but this is getting more ominous now with a pullback towards support at $80 level at daily ATR support. Daily momentum has switched to negative so a possible breakdown looms:

Gold re-engaged to the upside, with a small rise that almost took it back to its recent high at the $1870USD per ounce level after outperforming other undollars during the USD juggernaut. The bearish rising wedge pattern on the four hourly chart hasn’t worked here with short term support remaining so watch for a try at the former high again later tonight as gold bugs get embiggened:



Glossary of Acronyms and Technical Analysis Terms:

ATR: Average True Range – measures the degree of price volatility averaged over a time period

ATR Support/Resistance: a ratcheting mechanism that follows price below/above a trend, that if breached shows above average volatility

CCI:  Commodity Channel Index: a momentum reading that calculates current price away from the statistical mean or “typical” price to indicate overbought (far above the mean) or oversold (far below the mean)

Low/High Moving Average: rolling mean of prices in this case, the low and high for the day/hour which creates a band around the actual price movement

FOMC: Federal Open Market Committee, monthly meeting of Federal Reserve regarding monetary policy (setting interest rates)

DOE: US Department of Energy 

Uncle Point: or stop loss point, a level at which you’ve clearly been wrong on your position, so cry uncle and get out!

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